[Russ Winter]

To my mind China is in the midst of a severe bust. As such it is important to separate out those commodities that manifest boom like characteristic versus those that simply represent a developing nation. In this case agricultural commodities like soybeans, and wheat are relatively low on the scale. The conclusion to be drawn is that grains will trade around factors such as weather. Because of global warming I see weather as consistently, and perhaps epicly  poor. Thus grains should be somewhat immune to the China bust while metals are very vulnerable, with one exception.



COMMODITYChina’s PercentageCement53.20%Iron Ore47.7Coal46.9Pigs46.4Steel45.4Lead44.6Zinc41.3Aluminum40.6Copper38.9Eggs37. 2Nickel36.30%Rice28.1Soybeans24.6Wheat16.6Chickens15.6PPP* GDP13.6Oil10.3Cattle9.5GDP9.4The exception is silver.  About 70% of China’s silver demand comes from the industrial sectors.   However silver is widely used in the production of electronics, jewelry, industrial production,  medical, solar power and water purification industries.  Unlike construction and infrastructure all these industries are emphasized in China’s new five year plan (discussed here, in the second half).  Make sure you understand the transition aspect to a different Chinese economic model. Thus I see silver as a beneficiary of events in China.

On the subject of silver, it is discussed in some detail in this post.  Right now it looks like silver is heading toward the third target line. I want to sell options as part of my silver strategy. The January at the money puts at trading at a too cheap 41 IV. If this trades above 50 use the monthly, however the weekly is trading at 57. Therefore I am looking to sell SLV naked puts on the 25 strike January 6 weekly when it begins trading if SLV is below 26. This will be for 2% position if exercised. I will put on a second 2% if SLV trades at 25, and a third 2% if it trades under 25 combined with an expanded implied volatility.

On another front,  China announced on Nov.4 that they will phase out incandescent light bulbs within five year….. banning imports and sales of 100 watt bulbs starting October 2012.   This will act as another push for the lighting industry towards LED bulbs (US and EU are already set to ban sales incandescent bulbs around 2012).   While fluorescent bulbs will certainly be the replacement for much of this it will also drive additional LED sales, and drive GTAT’s sapphire business.  If you don’t own GTAT, this 7 print is a great entry level.

One of my favorites has been GT Advanced Tech (GTAT, formerly GT Solar) . They’re best of class in LED and solar equipment supplier  (PV crystallization furnaces). They have new products that accelerate cost reductions in solar module manufacturing, including a game changer coming next year called GT Monocast.  Now GTAT has started beta shipments of it’s next generation of state-of-the art monocasts.  Company is pushing the envelope on developing solar manufacturing technology picking up bargains in the sector.

They have a $2.3-billion backlog against a current revenue base of $1 billion. Ninety-eight percent of its revenue is in Asia. FY March 2012 estimates are 1.50 and FY March 2013 projections are 1.60.  They have 3.10 cash (little debt).







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